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New Academic Review by Martijn Cremers Challenges the Conventional Wisdom on Active Management

September 24, 2018

IAA Vice President, Communications & Marketing Herb Perone.


Washington, DC (September 24, 2018) – A “substantial body of research” calls into question today’s “conventional wisdom” about the value of active management, according to a fresh review of the academic literature conducted by professors Martijn Cremers, Mendoza College of Business, University of Notre Dame; Jon A. Fulkerson, University of Dayton, and Timothy B. Riley, Sam M. Walton College of Business, University of Arkansas. The review was supported by the Investment Adviser Association’s Active Managers Council. The IAA is the leading trade association representing SEC-registered investment management firms.

The review, titled Challenging the Conventional Wisdom on Active Management: A Review of the Past 20 Years of Academic Literature on Actively Managed Mutual Funds, cites close to 300 sources. It concludes that, on balance, the academic literature over the past 20 years shows that active fund managers have a variety of skills and, in many cases, tend to make value-added decisions. The review goes on to note that many funds do appear to create value for investors even after accounting for fees and other costs. The authors focus primarily on U.S. equity funds, but also consider active management in other asset classes, such as bond and international funds. In addition, the piece discusses the limitations and challenges in the current literature, important questions that remain to be addressed, and the degree to which mutual fund findings can be extrapolated to all active managers.

“Taken as a whole, our review of current academic literature suggests that the conventional wisdom is too negative on the value of active management,” say the authors. “While the debate between active and passive is not settled and many research challenges remain, we conclude that the current academic literature finds active management more promising for investors than the conventional wisdom claims.”

“Over the past several years a flawed narrative has gained traction that, because passive funds tend to be low cost, they provide more value than actively managed funds,” said Karen Barr, President & CEO of the Investment Adviser Association. “Professor Cremers and his colleagues’ academic review will begin to return the industry to a more balanced discussion on investment management. The industry almost universally supports incorporating both active and passive in portfolio construction. Framing the discussion as a binary, either/or decision does investors a disservice.”

For the complete academic review please visit: Challenging the Conventional Wisdom.


About Investment Adviser Association

The Investment Adviser Association (IAA) is the leading trade association representing the interests of SEC-registered investment adviser firms. The IAA’s more than 640 member firms collectively manage assets in excess of $20 trillion for a wide variety of institutional and individual investors. For more information, visit or follow us on LinkedIn, Twitter and YouTube.

About the Active Managers Council

The IAA formed the Active Managers Council to support education and research on the value of active management for investors and the capital markets and to engage on relevant public policy issues. For more information, visit

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